The financial media has recently been debating the “inverted yield curve” which is considered a sign of inevitable economic recession. Some experts believe another recession is lingering, like the 2008 drop in the market while others are taking that idea to the next level and divesting from the market. Other experts believe this is not a major problem and advice to continue investing as usual. How does the average investor know who is correct? HCR Wealth Advisors is advising that this is not a yes or no answer.
The Inverted Yield Curve
A yield curve is defined as the expected return from a set of various investments. In general, investments have higher return rates for those with longer terms (a one-year investment will yield less than a 10-year investment). In other words, the longer you wait for your money, the more you will make. When the yield curve inverts, the short-term investment yields higher returns than the long-term investment. For the entire economy, economists analyze Government bonds and notes, focusing on the gap between the short-term and long-term bonds, and this is where the inversion occurs.
Does the Yield Curve Guarantee a Recession?
Although the yield curve inversion has historically preceded every recent United States recession, not every recession has been immediate. In 1965 and 1998, the yield curve inverted but the recession occurred two years later.
HCR Wealth Advisors is telling the American public not to panic. Recessions are the result of numerous factors and the impact does not emerge for several years. Therefore, HCR Wealth Advisors are telling clients to proceed cautiously and look for safer options but don’t move it around as a knee-jerk reaction.
What they do
HCR Wealth Advisors is a wealth management firm headquartered in Los Angeles, California who provides financial planning and wealth management advice. They operate based on creating strong relationships with their clients and a network of experts by building trust. The result is a high retention rate of clients. Trust is built by HCR Wealth using old-fashioned transparency and honesty regarding their fees and walking their clients through the various planning tactics, so they understand the process.
This article is provided for informational purposes only and should not be interpreted as investment advice.